LATAM Airlines Group SA
SGO:LTM
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LATAM Airlines Group SA
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Good day, everyone, and welcome to the LATAM Airlines Group earnings release conference call. Just a reminder, this conference is being recorded.
LATAM Airlines group earnings release for the period was distributed on Tuesday, May 8. If you have not received it, you can find it in our website, www.latamairlinesgroup.com -- www.latamairlinesgroup.net, sorry about that, in the Investor Relations section.
At this time, I would like to point out that statements regarding the company's business outlook and anticipated financial and operating results constitute forward-looking comments. These expectations are highly dependent on the economy, the airline industry and international markets. Therefore, they are subject to change.
It is now my pleasure to turn the call over to Mr. Ramiro Alfonsin, Chief Financial Officer of LATAM Airlines Group. Mr. Alfonsin, please begin.
Thank you, Victor, and good morning, everyone, and welcome to LATAM Airlines first quarter earnings call. Joining me today are Ms. Cláudia Sender, Vice President of Customers; Mr. Roberto Alvo, Chief Financial Officer; Mr. Jerome Cadier, CEO of LATAM Airlines, Brazil; and Mr. Andres del Valle, Vice President of Corporate Finance.
Please join me on Slide 2, where you will find the highlights for the first quarter 2018. Our operating income increased 50% year-over-year to $229 million, while our operating margin expanded by 2.2 percent points to 8.4%. This result was explained by improvements in the performance across all passenger and cargo business units, offsetting the increasing cost resulting mainly from higher fuel prices. Total revenues for the first quarter increased by 10% to $2.7 billion. As we reduced unit revenue increases across all our business units and the 16.6% increase in cargo revenues. Passenger revenues per ASK increased by 7% year-over-year, while increasing passenger capacity by 2.9% during this quarter.
Total operating expenses increased by 7.6%, mainly explained by the 20% increase in the fuel price during the quarter, which currently represents around 29% of our total operating cost. Excluding fuel, cost per ASK increased only by 0.2%, offsetting inflation in the region. For the first quarter 2018, net income amounted to $94 million, $28 million higher than last years. While in the first quarter 2017, net income had a foreign exchange gain of $35 million, this year the foreign exchange gain was less than $1 million.
In addition, Moody's upgraded the corporate rating for LATAM from B1 to Ba3, reflecting the improvements in operating performance, leverage and liquidity. Considering that these improvement in results are sustainable and leverage will continue to decrease in the following periods.
In addition, during March 2018, fixed ratings changed the outlook of the company from stable to positive. Finally, on April 26, 2018, the shareholders meeting approved the dividend distribution of $46.6 million, which represents a 30% of the net income of 2017, payable on May 17, 2018.
This is the second consecutive year of dividend payments after the association between LAN and TAM. Turning to Slide 3, you will find a summary of our income statement. Our revenue performance continued to improve in the first quarter of 2018, with total operating revenues increasing 10% year-over-year to over $2.7 billion. This increase is a result of an increasing passenger and cargo demand as well as revenue per ASK recovery in all our business units. We flew over 600,000 additional passengers in this quarter, 400,000 of which correspond to the domestic operations and is translated from the new business model that we implemented in the past year. Passenger and cargo revenues increased by 10% and 16% respectively. Other revenues decreased 0.7%, mainly as a result of the implementation of IFRS-15 in the first quarter of 2018, which resulted in $19 million less revenue as compared to the previous disclosure standard. Total cost amounted to $2.5 billion, increasing 7.6% year-over-year, mainly explained by $123 million higher fuel cost as a result of a 20% increase in the average price compared to the first quarter 2017. Despite the overall increasing cost, we continued to make progress in our efficiency initiatives, which resulted in a leaner and more efficient organizational structure. As we have reduced the number of employees by 4.3% on a year-over-year basis and the numbers of aircraft that we're flying by 10 aircraft.
As a result, cost per ASK ex fuel increased by only 0.2% year-over-year. With all this, our operating income for the quarter rose 50% year-over-year to $229 million, accounting for an 8.4% operating margin, 2.2 percentage points higher than the first quarter 2017. The nonoperating result of the first quarter amounted to $74 million, loss in the first quarter of 2017 compared to the $24 million loss in the first quarter 2017. This year-over-year difference is mainly explained by the foreign exchange gain of $35 million in the first quarter of 2017. Net income amounted to $94 million, which is $28 million higher than the last year's result. I will like to spend a few minutes to comment some events from the past weeks.
Regarding the legal strike that affected mostly our domestic Chilean operations and although the strike isn't legally over yet, we have restored 100% of the operations since May 2. This is because 827 of our crew members individually decided to return to work. These [ 627 ] crew members are of -- a total of 842 crew members that were under the union. Between April 10 and May 2, the company had to cancel 2,000 flights affecting over 400,000 passengers. We regret the occurrence of this strike and the impact it had on our passengers. We understand that the aviation is a fundamental service for the connectivity of Chile. We have preliminary estimated the impact of the strike in around $25 million to the operating margin that will be affecting our results in second quarter.
Secondly, I would like to give you an update on the fleet regarding our wide body fleet in particular. As you probably know, at this moment, we are not operating 7 Boeing 787 aircraft out of the 24 aircraft of this model in our fleet. This is due to the extended maintenance requirement for the engines that we use in those aircraft. As a result, we are subleasing 4 Airbus A330s and 1 Boeing 747 to support international operations. We are working very close with Rolls Royce to reduce the impact to our passengers and the company. We regret the impact that this industry-wide situation is having on our passengers.
With that, I would like to turn the call to Mr. Andres del Valle, Vice President of Corporate Finance.
Thank you, Ramiro, and good morning, everyone. Please turn to Slide 4. We can see on this slide an overview of the revenue performance of the company during this quarter. We continue to see an improving revenue trend for the passenger and cargo businesses. This is resulting in part by a proactive capacity management across markets and another part by stronger demand compared to first quarter of 2017. As you will see on the slide, we have increased our capacity in all of our markets, while improving passenger unit revenues and load factors at same time. When we look at our international operations, which represent 56% of our total capacity, we see that our capacity was up by 3.4% this quarter, and the load factor reached a very high 87%. Our revenue per ASK, which was $0.66 increased by 9.2% versus last year, both in long-haul and in regional international routes.
On the domestic passenger front, which represents 23% of total capacity, we had a 1.9% increase in total capacity and load factors were stable at 82.3%. Revenues per ASK are improving almost 6% in U.S. dollar terms with respect to last year, while measured in Brazilian real , the revenue per ASK increased by 8.7%. In the Spanish-speaking countries' domestic operations, together representing 18% of our total passenger capacity, we grew capacity growth by 2.8%, with load factors that increased 1.5 percentage points to 83.6%. Revenues per ASK improved by 4% to $0.73, reflecting that we're well prepared to compete in this market despite the additional competitive pressures that we are seeing. As a result, in our passenger operations, revenue per ASK grew 7% year-over-year. This improvement was driven both by an increasing yield of 6.3% and load factor 0.6 percentage points to 85.3%. We have also increased our capacity by 2.9% year-over-year this quarter. Lastly, our cargo unit revenues have also benefited from the better demand outlook, mainly in Brazil's import markets, resulting in a consistent improvement in unit revenues and load factors in the past quarters. During the first quarter of 2018, we increased cargo capacity by 5%, unit revenues increased 11% to USD 0.184, while load factors rose almost 2 [ full ] points to reach 54.8%. Despite this improvements, in general terms, market volumes are still below prerecession levels, while first 2 have not yet fully recovered in Brazil. We believe that reports towards the cargo market will continue yielding results in next quarters. We have just sold one of our Boeing 777 freighters during the first quarter of 2018, and we would sell the last Boeing 777 freighter during this week. This leaves us with the cargo fleet composed only by 9 Boeing 767 freighters. We expect that cargo capacity will slightly increase in 2018 with this homogeneous lead.
Please turn now to Slide #5. We see that LATAM is growing almost in all of its markets. Only in the first quarter of 2018, LATAM transported more than 17 million passengers, of which almost 13 million were domestic passengers and 4 million were international passengers. This increase means that we transported around 600,000 more passengers than the first quarter of 2017, evidencing that, despite the competitive scenario in the region, especially in Chile and Peru, we continue to grow in these markets while maintaining very healthy load factors as we just saw on the previous slide.
In addition, we continue to strengthen our network. Only in the first quarter of 2018, we inaugurated 11 new routes, excluding 4 seasonal routes that we operated during the summer. Of the 11 new routes, we launched 6 new domestic market in Brazil and 5 new international routes, which include new destinations, such as Rome from São Paulo and San Jose, Costa Rica from Lima. Also, we continue to inaugurate new routes from our hubs to secondary cities in other countries, such as new flight from Lima to Medellin and Guarulhos São Paulo to Mendoza.
Please turn now to Slide #6. Here, we see that our costs have increased by 7.6% year-over-year to reach $2.5 billion. In general, what we see is an important increase in fuel cost, which represents around 29% of our total operating cost. Fuel paid per gallon, excluding hedge, rose by 20% during the quarter, which resulted in $123 million of higher fuel expenses. Costs associated with wages and benefits have decreased by 2% year-over-year, mainly driven by a reduction of 4.2% in the average headcount of the quarter as you can see in the chart at the bottom center of the slide. Regarding fleet cost, which include aircraft rentals, depreciation, amortization and maintenance expenses, they were up by 0.2% year-over-year in the quarter, in which higher maintenance costs were offset by low rental cost. As a result of reduction of 10 aircraft as compared to the first quarter of 2017, as you can see at the bottom right of the slide.
Lastly, the other segment increased almost 9% year-over-year, mainly as a result of increased volume of operations. As a result, cost per ASK increased by 4.6% year-over-year, while cost per ASK ex fuel increased only by 0.2%.
Please turn to Slide #7. Here, you can see our fleet plan for next years. Looking at fleet commitments, they maintain the same numbers that you are all familiar with. No news here. Regarding the stocks in this year, we have received 2 Airbus 321 and 1 one of the 2 350s -- Airbus 350s planned for this year, while redelivering Boeing one 787 freighter.
Furthermore, we are subleasing 5 additional aircraft to support our international operations as a result of the lower availability of Boeing 787 aircraft, 7 of which are not operating to sustain our growth plan for the year. We expect to end the year with a total fleet of 318 aircraft and for 2019, with 324 aircraft.
Please turn to Slide #8. Here, you see that -- our credit metrics for the first quarter. On the upper left-hand side, you can see that leverage has decreased up from 4.5x at the end of '17 to 4.3x adjusted net leverage. And we expect this number to continue decreasing towards the end of this year.
On the upper right side, we also have a healthy liquidity position of $1.5 billion of cash on our balance sheet. In addition to that, we have a revolving credit facility of $450 million that is fully available.
With that, our liquidity position represents 18.4% of last 12 months revenues. Below, on the same chart, you can see the debt maturity profile as of the end of March 2018. Here, you can see that most of the debt maturities for the next 2 years is composed by secured debt mostly related to aircraft debt. In 2020, we have the maturity of the LATAM 2020 unsecured bond issued back in 2015. This is field to your south. Also, we will evaluate the best way to address this maturity either this year or the next one.
Please turn to Slide #9. Regarding fuel and FX hedging portfolio shown this slide, after first quarter 2018, we have had 20% of our estimated fuel consumption regarding -- recording $6.5 million of fuel hedging gains, above the $2.4 million gains recorded in last year's quarter. For second, third and fourth quarter of 2018, we have a 45%, 44%, and 23%, respectively, of our estimated fuel consumption hedge. Of next year, we started to build our hedge position with just 3% for the first quarter of 2019.
Regarding the BRL during the first quarter 2018, we recognized a $0.7 billion gain related to foreign currency context compared to the $2.9 billion loss recorded in same period of 2017. We have hedged $100 million for the second and third quarters of 2018 and $60 million for the fourth quarter of 2018.
Please turn to Slide #10. Finally, here, we wanted to reaffirm the guidance provided earlier this year. We're expecting total capacity to grow between 5% to 7% this year. This is composed by a 6% to 8% target for both the international and the domestic Spanish-speaking countries segment and a 2% to 4% for the domestic Brazil business unit. We are also expecting cargo capacity to increase between 1% to 3% in this year. As a result, we expect our operating margin to be between 7.5% to 9.5% this year, an improvement from 7% operating margin recorded in 2017.
With this, we conclude our presentation. And we will be happy to address any questions from the audience. Thank you very much.
[Operator Instructions] And our first question comes from the line of Savi Syth from Raymond James.
Fuel prices have been coming up quite a bit here, even up a lot today. And just historically, I think, in the region there's been somewhat of a correlation between kind of high fuel and commodity prices and the demand. Could you talk about, in your sense, about the ability to maybe pass-through these costs in the form of kind of higher fares or high tariffs in kind of the 3 entities as well as the cargo segment?
This is Roberto Alvo. Yes, of course, everybody has seen fuel prices have come up significantly in the last few weeks. Ability to pass on prices to fuel depends on markets. In current capacity situations, we are -- we believe that, in the short-term, in the second quarter, these would be slightly more challenging since capacity is already being published by everybody. But we think that we'll see passing on of the fuel prices as the year progresses if the price of the fuel stays in the levels that it is today.
Are there some entities you feel more confident than others?
Yes. There's some markets where we believe that it's -- as in any companies, we have different segments with seasonal markets brought internationally, slightly more easy today to see passing on of the fuel prices on in other markets, but conditions depend on how capacity will move going forward the rest of the year.
Got it. And if I may, on the cargo front. Really good results, especially when you consider the higher capacity. It looks like, for the year, the capacity -- in 1Q capacity, you're 5%, but [ the year ], you're still thinking 1% to 3%. Are we to assume that kind of the capacity growth should slow down for the rest of the year? And then any thoughts as you kind of look forward on trends in -- on the cargo front?
Yes, so we have seen healthy figures in demand in cargo both north bound and south bound, particularly south bound. Our take is that the industries will stay healthy throughout the year. We are -- at this point in time, I think that the biggest concern we have in terms of capacity will depend on the recovery of the 787s because the airplanes that we are -- the 330s have lower belly capacity than the 787. So we have some impact in our capacity there. So we're not moving our guidance for capacity basically due to the fact that we have an issue with our [indiscernible] at this point in time. But we see a positive trend for cargo throughout the year at this point in time.
And our next question comes from the line of Duane Pfennigwerth from Evercore.
Regarding your RASK growth in the first quarter here, 9% in local currency in Brazil and similar 9% in long-haul RASK. How do you see those trending here into the June quarter?
Second quarter is low season in South America, and therefore, I would say that our view is slightly more conservative for the second quarter of the year in terms of RASK movement as compared to last year. We see different situations in different markets. But all in all, it's going to be more challenging quarter in terms of revenues because of seasonality.
Okay. Care to speak to where you see sort of greater deceleration, do you see greater deceleration in long-haul? Or do you see greater deceleration in Brazil domestic?
No, I would say that long-haul is relatively stable. We see deceleration in domestic Argentina to one extent. Domestic Chile, of course because of the strike that had a significant impact particularly in April, and that has an impact on RASK for that particular month in that particular business. And we see some degree of stability in domestic Brazil, although slightly weaker than the first quarter. The other markets are just in the low season.
Great. And then just lastly, I don't know if you're willing to comment, but can you speak to at what levels your fuel hedges and your FX hedges are in the money?
We cannot provide that -- too much detail on the levels of our fuel hedges or our FX hedges. But we can say that, as of today, they're both in the money.
And our next question comes from the line of Petr Grishchenko from Barclays.
This is Petr Grishchenko from Barclays. So just given the volatility in FX we see in Brazil and Argentina over the past several weeks, if there is no kind of subsequent recovery, do you think you would have to update your marginal guidance for this year?
So in terms of demand, at this point in time, our international markets are both Argentina and Brazil. We have not seen significant impact or an impact in bookings due to lower currencies -- local currencies as compared to the U.S. dollar. We have not seen that effect. I think that a few Brazilis had uncertainty in terms of the political situation going forward, but what we've seen so far is that second quarter remains relatively stable in terms of bookings as we try to understand the effect or the potential effect of FX movement for those markets.
Okay. And would you consider, I guess, maybe hedging more BRL, just considering disclosure you provided. It's not like a very large portion of your exposure. So I'm just curious if you will increase the hedges?
Yes, to date we have $100 million for Q2 to Q3, which is roughly 75% of the exposure. For Q4, we will continue building up the position because we have [ $6 million ] and that whatever we build up should be in line with what you're seeing for both Q2 and Q3, and then of course, going forward, I should see our hedges, I think, increasing.
Got it. And last question, I guess, you reported the capacity adjustments that you have to make on the routes from Brazil to Europe to maintain RASK. I was just wondering if that was in line with your prior expectations. Or you had to make some adjustments on the fleet size there?
No, the capacity adjustments we've made are more practical adjustments related to how we deploy the different aircraft we have in the different routes. They're more related to those operational movements than to anything else.
And our next question comes from the line of Stephen Trent from Citi.
I just had a follow-up on Duane's question, if I may. When I think about the unit revenue in Spanish-speaking market's up 4% year-over-year in dollars in the first quarter. Any color with respect to what the RASK trend in the Spanish-speaking markets is on a local currency basis as we consider the shift from 1Q into 2Q. Any color on that?
So we normally don't provide guidance on -- or forecast on unit revenues. I think that we have to -- I mean, we stick to the guidance and the impact we expect that the movements in the market will have on our margin. As I said before, we see -- demands are relatively healthy. Having a low season in place, of course because second quarter, but we don't see today impact that preoccupy us in terms of demand.
Okay. Appreciate that. And just one other question. I think your opening comments you mentioned that your employees in Chile have gone back to work, and everything is normalized since May 2, but the strike's not technically over. Kind of any broad view with respect to what financial or other concessions you have made to get those employees to return?
Sorry, this is Claudia. No, what happened is that as employees decided voluntarily and individually to come back to work, they agreed to the last offer that the company had made, which is very similar to the working conditions and benefits that they had prior to the strike and no real salary upgrades.
Okay. Appreciated. In that regard then, I was just not sure what you guys meant by the strike not being technically over.
By the Chilean law, the strike is not legally over once the last employee comes back to work. Today, we have less than 20 crew members that still have not come back to work. Most of them are in health license or post-birth licenses. So that does not impact at all our operations.
And our next question comes from the line of Miguel Moreno from LarrainVial.
I have 2 questions. The first one is regarding the elasticity of demand, especially when -- if oil prices continue to rise and regarding the question of the pass-through, which of the segments you have higher elasticity? How could this increase in prices could affect demand? The second question is regarding load factors. You have done an excellent work, especially international routes. Do you have like a top structural -- like top in load factors? I mean, 80% sounds high. Do you have room to continue improving? How do you see the load factors in domestic Brazil and SSC rising for this year?
Miguel, this is Roberto again. So I will try to answer your second question first and then the first one. So load factors are in the upper 80s international. We have still the improved load factors international as -- through the years. We don't have a specific target. Our target is to maximize RASK all the time, but as we have become more sophisticated on revenue management policies and procedures, we believe that we can keep improving the load factors slightly year-by-year, period-by-period without diluting our revenue per ASK. So going forward, we work in trying to maximize the revenue of our aircraft all the time without taking consideration of the load factor as being the main -- the most important metric here. It's good news that we increased our RASK 9% in international and at the same time increased our load factor. I think that's main take. With respect to elasticity, I'm not sure I can explain as the question is technical. So at the end of the day, there's relatively high elasticity in lower-priced passengers, as it happens in any market. As we pass through fuel, or we try to pass through fuel, we'll see what happens. At this point in time, again, I think the demands are relatively healthy in most of the markets. So we don't have today, at least, concern in terms of elasticity, we have basically an understanding of how [ viables ] move throughout the year.
And our next question comes from the line of Mike Linenberg from Deutsche Bank.
I guess I have 2 questions here. I just -- recently, there's been press reports about LATAM contemplating the start of a stand-alone LCC operation and whether there's some truth behind that or not, I'm just curious based on your new domestic operations sort of the low-cost domestic platform that you have today, what would you like to say that you could possibly get the -- a separate LCC subsidiary rather than -- versus what you are able to do with what you have today? Won't it be that the operation that you've been developing internally, that, that's sufficient? Or do you feel like you have to go to the next step and have a separate LLC subsidiary? Just your thoughts on that?
Okay. Mike, this is Claudia. I think, first of all, we're always looking into strategic projects and of course, we have to contemplate given the competitiveness of our markets, which is increasing every day and here in Chile, more than any other market with the arrival of new low-cost carriers. We need to be looking into new potential projects. And the project of implementing or potentially implementing a low-cost carrier is something that has to be opened, and the only thing that was done was ask for an operational license to be able to launch it in case we wanted to. So today, it's still very possible project, not a reality, and it's something that we will always be contemplating to make sure that LATAM as the leader airline in the region position, which we want to maintain, has to contemplate to make sure that we can face the competitive pressures in each of our individual markets.
Okay, great. That's helpful. And then just my second question. With respect to the disruption of having grounded 787s with the Trent engine, to see those planes parked with engines off of them is obviously not a great sight. There's obviously some cost there. I mean, I know you highlighted the fact that the strike impact in June quarter was $25 million, but I would think that having grounded airplanes and the fact that you have to go out and wet lease a few A330s and a 747, there's obviously cost there. Is it safe to assume or the way to think about this is that whatever cost of disruption and wet lease is maybe being offset by some form of compensation from the manufacturer, the OEM, so that at the end of the day, we should anticipate a hit from the disruption of the long-haul fleet? Is that the right way to think about it? Or is that something that we have to be mindful of as we move through the second quarter?
Mike, this is Roberto. So of course [indiscernible] is very aware of the impacts of having not only parked aircraft, also operating aircraft that are not our product. But [indiscernible] enable us to provide the service and the product that we want to provide to our customers. So they have full awareness of this. Of course, there's commercial conversations going, to which I will not [indiscernible] At least the purpose is addressed, but at this point in time, I don't think we are -- we feel that this is going to be -- we're more concerned of the fact that we are affecting our passengers than anybody -- than anything else at this point in time. We want to solve this problem as quickly as possible.
Okay, great. And then could I just squeeze in one last one as it relates to domestic Argentina. We talked -- you've mentioned about demand across the region, and that was the one country that was down. Now I know we just had a big move in the currency. But this is a March quarter number, where it was down 16%. And I did see that it looked like LATAM Argentina actually pulled out of some markets. And so I'm not sure what's driving that? Is it currency? Is it macro? Is it new competition? Or is it just rightsizing the Argentine operation? What's behind that down 16% and some of those market withdrawals that we have seen?
I think it's the latter comment you made. It's -- we're rightsizing into the current situation in domestic Argentina more than anything else.
And our next question comes from the line of Barbara Halberstadt from Bank of America.
Actually, my question was going to be on the low-cost carriers, which was already answered. And at least I can fit another one. It would be regarding the Open Skies agreement and the JV with American Airlines. If you could comment a little bit, what's the status of that? And what's the next step to get this launched?
So during the last few months, we got approval from both the lower and the upper houses in Brazil for Open Skies, that basically ends up -- the approval process, in the Congress in Brazil. The only thing that's waiting is the ratification from both the U.S. and Brazil of the Open Skies agreement that was signed several years ago. So this is more of a bureaucratic process that is underway. As soon as that happens, we will re-file with the DoT, request for JV between American and LATAM. And that will happen as soon as we get the approval as I said, and then we will have to wait for the DoT to pronounce itself. So it's positive. We've passed all the most important milestones in this process with American, particularly now, we're just pursuing the last step in the agreement with American Airlines. In the case of the JVs in general, we're still waiting for the approval of the Antitrust Court in Chile. We don't have -- they don't have a timeline, so they can make their decision at any point in time. And basically, the implementation at this point in time is still subject to that particular approval. I mean, the case of American, that approval and of course, what I just mentioned, the DoT.
And our next question comes from the line of Rogério Araújo from UBS.
I have 2 follow-up questions here. First, on yields. There was an increase in the volatility of local currencies in the recent weeks. And I want to know how LATAM's international flight bookings are behaving if there is already an impact from people -- from local people less willing to fly abroad? If you already saw that movement? And what to expect? This is the first question. The second follow-up is regarding the low-cost carriers. When you look at the Chilean and Peruvian markets, the volumes are going up for LATAM. We see 6% increase in Chile in the beginning of this year, 5% in Peru, even though LATAM has been losing market share because of the ramp-up of the local low-cost carriers. So my question is regarding how LATAM is perceiving this competition if there is an impact on the demand or in ticket fares? So how you are dealing with that in terms of yields in these specific routes where those new players are ramping up?
Rogério, this is Roberto again. So on your first question, I think I pretty much answered. We have not seen at this point in time impact on bookings due to the movement of the currencies in the region. We're closely monitoring, but we have not seen a significant impact that we can measure at this point in time from there. Just bear in mind that this second quarter is low season, but it's in line, more or less, with the expectations in terms of the potential impact of the currencies could have on bookings. So we don't see it at this point in time. With respect to the second question, as you know, we've implemented a model, it was announced over 2 years. We're quite happy with the results of the model at this point in time. [indiscernible] is working well. In most of the features that we deployed, we have seen positive results overall. We think we have the right strategy for our company to compete with low-cost carriers. We're prepared to do that. Our market share is not our most significant metric, but of course, we will defend our leadership position in the places where we see that there's competition coming. Load factors of some of those competitors are relatively low, which I think underline that our strategy has been paying off as we deploy.
[Operator Instructions] Our next question comes from the line of Bruno Amorim from Goldman Sachs.
So my question regards international traffic. I'd like to understand, to the extent possible, what's the share of outbound traffic out of the region, out of Brazil, Argentina, the main countries in LATAM as opposed to the traffic from other regions from the U.S., from Europe, into the region? I'm just trying to understand, try to [ extend ] if the currency depreciates in the region and outbound traffic falls to what extent inbound traffic could offset this eventual downturn?
Bruno, so on average, approximately 55% of passengers are sold in local points of sale. So in the countries, in South America
[Audio Gap]
we operate, and the remainder 45%, it's all abroad. It varies, of course, route by route and country by country, but that's more or less the split, 55:45. And of course, depreciation of the currencies in South America also make South America cheaper for traveling here. So in general, when we see changes in the past in currencies, one thing compensates pretty much the other. And today, our revenues are relatively well balanced between what we sell in the region and outside of the region.
It's clear. When you look forward through your bookings, are you seeing these move, people from other regions booking more and Brazilians, Argentinians booking less or not yet?
I think, as I explained earlier, at this point in time, we have seen no impact due to the currencies in our bookings.
And I'm showing no further questions at this time. Thank you, again, for joining us today. Please feel free to contact our Investor Relations department if you have any additional questions. We look forward to speaking with you again soon.